Monday, September 10, 2012

Required Reading: Finances, Pensions, Work

Read these three articles. Let us begin...

Carrying just a 1% cushion is just awful. Awful! Know that.

All credible experts say governments should carry at least 4-5% for [finger quotes] "just in case." Meteor strikes and more routine bad news. Flooding. Unexpected company.

Borrowing interest rates are at historic lows, so Rich Fitzgerald's idea to float a bond is by no means ludicrous. Yet it is so much more pleasant going into debt when we can imagine returns on investments in specific programs or infrastructure -- debt simply to fill the cash box seems unfortunate. Especially if there is a structural deficit at work, and we are just going to have to go to the well once again in a couple years.

Enter new Republican County Council member at-large Heather Heidelbaugh:

"I am in favor of an entire package that would look at raising revenues in ways we haven't considered in 15 years and then rolling back the millage," she said.

The county needed an additional $12 million to $14 million to close its budget gap, and it might be able to find some of that revenue in revised fee schedules, she said. "It is responsible to look at how much an individual user of government services is paying for a service and whether that covers the actual cost [of providing it]," she said.

"We also might be able to raise some revenue in a capitalistic way in the medical examiner's office," she said. (ibid)

Heidelbaugh is talking in a way that I like to hear. Keeping the scornful rhetoric in check. Strumming her partisan ideology like a steady bass guitar, not wailing on it solo like some kind of double-necked synth.

If county Democrats can begin working with some credible Republican governing partners, that can only help move things along.

Also, a note on gas drilling on County land for County profit: This Region Be Fracking. There is no ignoring that. If we can identify and vet an Allegheny County site and get involved in pursuing a pilot project, the public oversight employed might turn the whole thing into an excellent laboratory experiment. That is, in addition to the revenue, which, once again, we seem to require in an awful way.

Oh, but one last thing [Columbo impersonation] take note that we recently discovered that back when we raised the sales tax by 1%, we didn't break the County by any means.


It's nice to have a rock star institution in the heart of the city, and the Mark Nordenberg needs to be congratulated for that.

“The universities taking property off the tax rolls has always been an issue,” said Frank Gamrat, a senior research associate with the Allegheny Institute for Public Policy in Castle Shannon. “But there are a lot of positives to having them there. They bring people into the city to work. Those people contribute to the city indirectly, through wage taxes and supporting other businesses. (ibid)

I don't see why we must have so much trouble conceiving of both. Appreciate and cultivate the wages, revenue and activity the University provides, while understanding that property tax exemptions present serious issues of imbalance. It was not this hard to build out a sewer system, for example, back when steel and coal were the driving forces.

Public officials need to continue working on divining appropriate instruments by which we might glean for the public only appropriate shares of our Non-For-Profits' impressively deft wealth aggregation practices. Even if those solutions are narrowly tailored by case or category.

In 2008, [Nordenberg] agreed to chair a 13-member committee assembled by Ravenstahl and then-Allegheny County Executive Dan Onorato to study the pros and cons of consolidating city and county governments.

Though the group worked for 17 months, little came of its report recommending “functional cooperation,” Nordenberg acknowledged.

“There clearly was resistance,” Nordenberg said. “It has not gone far at all, and so you could say that perhaps it has become yet another of those reports that is gathering dust on shelves.” (ibid)

That old thing (pdf). To think this was once exciting. The idea was to obliterate just one government out of over a hundred (the City of Pittsburgh) and turn it into an "Urban Services District" of the County. Practicalities and functional consolidations and cooperations were missing from the focus, and the ambient disengagement turned the much-anticipated final product into a poison pill. There is so much refreshing frankness in this interview with Nordy -- the up-side of a puff piece.

Oh, and one more thing ... and this just popped into my inbox yesterday ... the affordability of college education? Word is out on the street, it doesn't add up for most people. Soon it will be trendy to say, "college is a rip off".


I had seen the characterization of this as "crazy", but not the defense of it as "absolutely false." That debate is rather important.

We must needs use Michael Lamb's sortie here, and the fundamental pension-management issues surrounding it, as a springboard to begin considering these Lamb / Peduto / Ravenstahl determinations facing Pittsburgh soon. And in a very capitalistic way. Pittsburgh deserves clarity as to its options as early as workable, so it can make real and conscious choices when those times come. This major project however will have to wait until next week. And unfortunately for Our Controller we can't simply rely on financial numbers and transparency practices... there are neighborhood development issues, infrastructure issues, personality issues, boy this will take the whole solid week of the 17th.


  1. Bram vs. Bram vs. Bram

    In today's post you write:
    "Also, a note on gas drilling on County land for County profit: This Region Be Fracking. There is no ignoring that. If we can identify and vet an Allegheny County site and get involved in pursuing a pilot project, the public oversight employed might turn the whole thing into an excellent laboratory experiment. That is, in addition to the revenue, which, once again, we seem to require in an awful way."

    As contrast to such bold proposals, I must point backward to this timid paragraph, offered up two years ago to this very day, on September 10, 2010.

    "DRILLING PREDICTION: I think it's inevitable the state will do something to slow down this rampaging [fracking] industry until the sciences of health risk assessments and optimal drilling technologies catch up. The only questions are: whether they will do it reasonably soon, or way too late and in shame and disgrace; and whether they will do it before the shame-and-disgrace zone hits my city, its environs and whatever lies precipitously upstream."

    Is up-to-this-minute Bram convinced that the science of health risk assessment has "caught up" enough to venture the bodies of Allegheny County residents for such a brave-new-world laboratory experiment as he has suggested today?

    Is today's Bram arguing that such an experiment, like the Carnegie's exhibition on energy production in March of this year, "is not about de-emphasizing or shelving the cautionary or less-welcome scientific trivium having to do with energy production..."

    Maybe today's Bram might agree with March 2012 Bram that, after all, "Children don't deserve controversy in their science, so let's show them just half the equation, and let's make it the business-friendly half where things get sold."

    Second comment:

    To address the supposed profitability of experimentally selling Crack because we just need the money so freakin' bad, (oops, maybe I just meant to write "Frack?" but I'm not sure because I've been drinking the water around here) I'll highlight a key observation offered yet again by the worthy Chris Briem of Nullspace, who has been tracking the trend in our narrative arc of returns on our tax-break dollars:

    Natural gas itself is plunging again. (real time prices). I would not trust anyone's predictions in NatGas markets, but there was serious talk of ever more drops not long ago. If any of those predictions come to pass CHK will be in a lot more trouble than it is even today. So will a lot of other producers I imagine.

  2. From The Rolling Stone, a true-life stone-cold outlay of con-artistry that we here in Allegheny all might better learn from when we consider get-rich-quick experiments. This entire Jeff Goodell article is really a must-read. (Note, the abbreviation "CHK" that I quoted from Briem in my previous comment refers to Chesapeake Energy Corporation, also referred to in the quote below.)

    The Big Fracking Bubble: The Scam Behind Aubrey McClendon's Gas Boom

    Fracking, it turns out, is about producing cheap energy the same way the mortgage crisis was about helping realize the dreams of middle-class homeowners. For Chesapeake, the primary profit in fracking comes not from selling the gas itself, but from buying and flipping the land that contains the gas. The company is now the largest leaseholder in the United States, owning the drilling rights to some 15 million acres – an area more than twice the size of Maryland. McClendon has financed this land grab with junk bonds and complex partnerships and future production deals, creating a highly leveraged, deeply indebted company that has more in common with Enron than ExxonMobil. As McClendon put it in a conference call with Wall Street analysts a few years ago, "I can assure you that buying leases for x and selling them for 5x or 10x is a lot more profitable than trying to produce gas at $5 or $6 per million cubic feet."

    According to Arthur Berman, a respected energy consultant in Texas who has spent years studying the industry, Chesapeake and its lesser competitors resemble a Ponzi scheme, overhyping the promise of shale gas in an effort to recoup their huge investments in leases and drilling. When the wells don't pay off, the firms wind up scrambling to mask their financial troubles with convoluted off-book accounting methods. "This is an industry that is caught in the grip of magical thinking," Berman says. "In fact, when you look at the level of debt some of these companies are carrying, and the questionable value of their gas reserves, there is a lot in common with the subprime mortgage market just before it melted down." Like generations of energy kingpins before him, it would seem, McClendon's primary goal is not to solve America's energy problems, but to build a pipeline directly from your wallet into his.

    Read more:

    And I'm hesitant to do more cutting and pasting of this fine article into a comment section, but I strongly urge you to read further regarding the health hazards of the big Marcellus Shale experiment so many of us have been swept up into.

  3. Here's one other past dot on the graph of the Marcellus gas-bubble profitability plunge that Briem has been shining his data-bright spotlights on:

    And, finally - at least for tonight - here Briem notes that the jobs coming to PA from fracking are often not enjoyed by Pennsylvania residents:

  4. We should start vetting sites. Maybe we'll find a good one, with little direct human contact and ample built infrastructure. There is "airport" land, for starters.

    Or maybe we won't find a good site. We should use what we learn during the process. But I wouldn't rule out the possibility of getting a minimal-risk pilot project pumping by the time natural gas prices rebound in... two years? Three? If we're doing this right (all the RFP's alone...) it will take a nice while. If and until that happens, we can always keep burning rocks, precipitating acid mine drainage, and underfunding our bridges.

    Can we dedicate all proceeds from the drilling rig to green sewer infrastructure? That will subsidize stormwater district rates in the same way the casino relieves property taxes.

  5. Why the O'Connor pic?

  6. Anon 9:31 - The victory night photo is at once meant to recall the O'Connor / Peduto / Lamb primary race of 2005, and to evoke a feeling of boundless and widespread optimism for a 'Burgh election.

  7. Okay, I'm going to take the comment above point by point, but I'm super short on time this week, so I'm going to have to answer over a number of posts and address many of your key assertions with cut-and-pastes.

    Bram, you write:

    1. We should start vetting sites. Maybe we'll find a good one, with little direct human contact and ample built infrastructure.

    "Little direct human contact" - you write as though we can quarantine fracking fluids like biological pathogens passed from breath to breath, or hand to hand contact? We're talking water tables and rivers-as-toxic dumps used by many thousands of people.

    First I'm gonna go drilling back into Jeff Goodell's fine article at Rolling Stone

    Well failures, in fact, are fairly common at drilling sites. I ask Anthony Ingraffea, an engineering professor at Cornell University and a former consultant for oil-service firms, to look at the 141 violations levied against Chesapeake in Pennsylvania last year. According to Ingraffea, 24 of them involved failures of well integrity. "When a well loses integrity, it means the seal is broken and something – usually methane, but it could also be flowback water – is leaking out underground," he says. "And it's impossible to know where it is going, or in what amounts"...

    Random data I sampled from five wells that Chesapeake drilled in Pennsylvania and Ohio last year reveals that the company injected between 24,000 pounds and 230,000 pounds of chemicals into each well. Some of the chemicals are relatively harmless, used in common household products. But others – such as 2-butoxyethanol – are known to cause cancer in animals.

    An even larger threat is the flowback waste that is pumped out after a well is fracked. It's a salty brine, mildly radioactive, and laced not just with toxic chemicals but with natural hydrocarbons and heavy metals like barium and benzene, which are known carcinogens even in minute quantities...

    ...Last year, scientists at Duke University, McClendon's alma mater, published the first rigorous, peer-reviewed study of pollution at drilling and fracking operations. Examining 60 sites in New York and Pennsylvania, they found "systematic evidence for methane contamination" in household drinking water: Water wells half a mile from drilling operations were contaminated by methane at 17 times the rate of those farther from gas developments.

    Read more:

  8. Then I'm going to lazily provide a few links to all these wonderful primary source EPA and gas company documents the New York Times made public for the first time...

    This PowerPoint presentation, given by E.P.A. officials in 2009 to state and federal regulators in Pennsylvania, includes some of the results from an E.P.A study that tested whether certain rivers can sufficiently dilute radium-laced drilling wastewater. Such wastewater is passed through sewage treatment plants and discharged into the rivers; in their modeling, E.P.A. researchers looked at one plant where waste was being discharged into the Ohio River, a comparatively larger river that provides more dilution. They also studied another plant that discharged waste into the South Fork Tenmile River, which is smaller and thus provides less dilution. In both cases, the scientists found that the rivers would not dilute radium to allowable levels, according to this slideshow, as explained by an agency scientist familiar with the research. The radium levels considered in the agency’s modeling were also much lower than those found in The Times's review. E.P.A. officials said that the type of calculations done in their modeling of radium-laced waste discharged into rivers are actually something that the state is supposed to be doing as a standard step before they issue permits for sewage treatment plants to accept drilling wastewater. But the E.P.A. officials added that the state had not been doing all of these sorts of calculations for the range of contaminants, including the radioactive elements, in the wastewater.

    And for extensive but easy-to-digest and really-super-scary NYT annotations on "confidential Environmental Protection Agency draft document on the environmental impacts of the oil, gas and coal industries. It shows that federal authorities are concerned about public drinking water supplies in the region of the Marcellus Shale..."

  9. And, final toxic dump into the Comet's threads for this morning - here is the NY Times link to primary source docs right from the gas driller horses' mouths.

    Just think of all the cleanup-related Marcellus jobs for PWSA, Alcosan, EPA, etc!

  10. I also will have to respond similarly "point by point" (cough) later in the day, but suffice to say...

    1) I agree fracking comes with real dangers and...

    2) If by declining to drill on any single plot of Allegheny County public land, there then would be little or no drilling at all in the region, then this would be an entirely different conversation.

    3) As partners, regulators and overseers with deep pockets for legal shenanigans, Allegheny County might actually *demand* dilution be sufficient and *drive* best and even better practices etc. The results could be better than if that rig instead located 100 yards down the road to Farmer Bob's land.

    Plus it might solve Luke's problem, "Why won't any energy industry types set up headquarters around here?"

    Next time you door knock Greenfield, ask them whether they'd appreciate the #job activity within driving distance of their homes, in exchange for the challenges of doing the best we can with its waste products.

  11. "Deep pockets" - WHAT? Okay, maybe I'm missing some big piece of your argument and our financial situation, here - maybe you are referring to deep wells of non-Monopoly money found at about the same geological levels as all that natural gas that is reaping such illusory benefits for all concerned at ever more rock bottom prices?

    Am I understanding correctly that the first part of your post was addressing the low reserve $ Allegheny has in the bank as cushion for natural disasters, etc. - disasters just like the big non-Act-of-God caused by Chesapeake fracking in Bradford County last year?

    Yes, Bram, WAY-more-common-than meteorite disasters aside, it costs a lot to do demonstration projects, and to conduct experiments, and the common sense cost/benefit analysis might suggest that such efforts and dollars be better spent on hard science, do-no-harm studies and demo projects of green infrastructure. We have models of success in other cities, but we need more local and specific data to help analyze and quantify how much expenditure and damage that system-wide porous pavement, bioswales, rain gardens, etc. might save this particular County from. Instead of your pilot project out on "airport land", let's figure out how we can adapt far less costly green infrastructure to this particular soil and watershed structure as we try to re-engineer our currently grossly inadequate systems of sewage treatment, stormwater storage capacity, and prevention of flood damage, water-borne diseases, toxic poisoning.

    Yes, those Greenfield and Hazelwood residents I work with every day do indeed also think about the health care bills that they could be bearing for their entire, although perhaps drastically shortened, lifetimes as a result of various forms of pollution that Alcosan can't clean out of their water. Fracking adds yet another poisonous burden to both our bodies and bank accounts.

    As regards the jobs bubble this gas industry is selling like Katrina-proof beachfront property on the Gulf:

    However, Marcellus drilling has been declining in Pennsylvania for months because of industry cutbacks, and some northern-tier counties have been hit especially hard. The number of Marcellus wells drilled in Bradford County in July was 87 percent lower than during the same period last year. Preliminary government data show that Bradford County's unemployment rate had climbed from 5.9 percent in June 2011 to 6.2 percent in June 2012, and residents are bracing for more bad news.

    Again, as Briem pointed out in the article I posted earlier, Chris Maher also affirms:

    Gas companies have employed many out-of-state workers with more drilling experience, who are likely to spend a good chunk of their income at home, muting the economic benefits to Pennsylvania.

    And yes, Greenfield and Hazelwood residents across all ranges of education and class are interested in the many green jobs, from hydrologist to gardener, that might revitalize their neighborhoods, jobs literally right at their sidewalks, their streets, their local shopping centers, their parks.

  12. Speaking of Greenfield and green jobs, why does the Chevy Volt never move from the spot in the Giant Eagle?

  13. Helen - My "deep pockets" really should have read "talented attorneys we already have on retainer." And the advantage of my demo project would be that we wouldn't be providing the capital for it.

    Let's save the green infrastructure discussion for a soon-to-be-arriving post, as it's really a totally separate subject that I certainly do not mean to be appearing as though I'm attacking. I just floated the idea of "fracking revenue for green projects" as an example of how revenue can be good -- and of "jobs" or economic activity stemming from a County drilling demo as, well, a side-benefit which residents might well say they'd also enjoy upon being asked.

    MH - Maybe it's a matter of finding a long enough extension cord.

  14. The space is for electric cars and has a charger.

  15. Well - the "deep pockets for legal shenanigans" conversation will have to wait - I don't yet understand the issues and systems well enough to hold my own at all here.

    Bram, you write:
    Can we dedicate all proceeds from the drilling rig to green sewer infrastructure? That will subsidize stormwater district rates in the same way the casino relieves property taxes.

    Yes, cigarette taxes (often originally proposed by idealistic money-grubbers-for-awesome-causes) have most certainly resulted in unintended consequences - rather than act as true deterrent to physical addicts, such taxes ended up addicting the political structure to Big Tobacco. I don't want my elected leaders of either party any more addicted to Big Fracking than they already are.

    And I'm not even going to let me get started on the addiction to casinos and lotteries as revenue streams.